Harnessing competitiveness for social and ecological goals

by Karl Aiginger

The term competitiveness has been “captured” for too long by lobbyists and politicians in pursuing a low wage strategy. The right-wing populists of today, like the new US administration, have extended this low road agenda by calling for lower environmental ambitions and for a lower social standard. The potential loss of jobs due to “unfair” low cost competitors, but also to inward migration, can mobilize popular support against globalization, even if the trade balance is positive, as it is in the EU. This article argues that countries focusing on innovation, skills and product quality are more successful in the long run. Especially for industrialized countries this is the only strategy to further increase welfare, since low cost countries will enter the market all the time. A high road strategy however needs an alternative framework of concepts and definitions: competitiveness is defined as the ability to deliver outcomes that include social and environmental goals; performance is measured by “Beyond GDP indicators”; and finally a systemic industrial policy has to support innovation and retrain the losers of structural change. In a “high road” approach, competiveness harnesses societal goals and undermines the roots of populism.